What Should I Look for When Reviewing Condo Financial Statements?

Those who serve on their condo association’s board of directors will become highly familiar with their HOA’s financial statements. These documents are key indicators of the association’s financial health and will inform decision-making, particularly when it comes to setting the annual budget. 

Here are a few important elements board members and all unit owners should look for when reviewing the condo association’s financial statements.

  • Key financial statements – Documents like the balance sheet and income statement provide a snapshot of the association’s financial position. They will outline its revenue, expenses, assets and liabilities. Pay attention to any significant deficits, increases in expenses or signs of financial mismanagement as you review the statements.
  • Budget versus actual comparisons – It’s also informative to assess how actual financial results compare to the budget. Identify variances and understand the reasons behind them. Evaluate whether the budget was realistic or if adjustments are needed.
  • Reserve funds – The next place you should look is the association’s reserve funds, which are funds set aside for future repairs, replacements and major capital projects. You’ll want to be confident that the association is regularly funding reserves and has a clear plan for addressing upcoming expenses. 
  • Special assessments – Consider the association’s history of special assessments. Frequent or large special assessments may be a concern for unit owners and should be explained by the board.
  • Transparency – Illinois condo board members are required to act as fiduciaries for their association. That means they must make budgetary decisions that are in the members’ best interest and do their part to serve the community as a whole. If transparency is not promoted in financial reporting, it could be a red flag for owners. 

Reading and reviewing condo association financial statements can be challenging. Board members should never hesitate to consult a financial professional or partner with a community association management company to assist them. To reach out with your questions, get in touch with us at First Community Management

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